Some successes and failures in profit sharing;

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84 HASKINS & SELLS November
Some Successes and Failures In Profit Sharing
PROFIT-SHARING has been sug-gested
as the panacea for ailments
growing out of the relations between
the capital and labor groups in indus­try.
Would the recent strikes of the
printers, expressmen, longshoremen and
laundry workers have been prevented
had the employers introduced some sys­tem
of profit-sharing? Would the strike
in the steel mills have been averted had
the administration of the United States
Steel Corporation, instead of giving its
employes frequent and liberal increases
in wages and the opportunity to buy the
common stock of the company at some­what
less than the current market price,
instituted some plan whereby the workers
would have shared, as such, in the pro­fits?
The value of profit-sharing as a
remedy may perhaps be better judged
after a consideration of its object and
history and some of the instances where­in
it has either succeeded or failed.
Profit-sharing is that plan wherein the
worker receives, in addition to his wage,
a share, determined in advance, of the
profits. It is not specifically related to
the wage system, which aims to increase
the compensation of the worker as he
increases production and thereby reduces
cost, or which allows him a share in
the saving representing the difference be­tween
a standard time and his actual
time, when the latter is shorter. It has
nothing to do with the Differential Rate
Plan used by Taylor or the Individual
Effort System originated by Harrington
Emerson, which achieved such publicity
through its application in the shops of the
Santa Fe Railroad that it is frequently re­ferred
to as the Santa Fe System. All
these schemes are limited to and affected
by the labor operations and the relation
of production to labor costs and overhead.
Profit-sharing takes no specific cognizance
of the part which the individual plays in
the result. It is assumed, however, that
the hope of sharing in a profitable result
will serve as the necessary incentive to
each individual and spur him on to con­stant
effort to the end that the result may
be as large as possible.
If the employe receives a gift at
Christmas time, or at the end of the
year, it is a bonus and not profit-shar­ing.
It is something which results from
the generosity of the employer and may
depend upon his mood. Under a profit-sharing
scheme the share may depend
upon the generosity of the employer, but
it is fixed in advance, thus constituting a
right which is conferred upon the
worker, and is something to which he
may look forward. It is probable that
he might enforce such right at law.
The profit to which reference is made
is the net profit. Such profit is that
which remains after deducting all sell­ing,
administrative and financial ex­penses.
In short, it is that profit which
is available for distribution after tak­ing
out all applicable costs and expenses;
that residue which, ordinarily, if it
were not distributed as dividends would
pass to surplus. This interpretation has
been modified in various instances in that
interest on investment has in some cases
been charged before the determination of
the amount subject to distribution among
the members of the proprietary group
and the manual workers.
To trace the history of profit-sharing
would be to trace the history of capital
and labor in enterprise. Writers usu­ally
agree that profit-sharing in a broad
sense must have had its origin in remote
antiquity. The earliest reference to its
existence in concrete form is in the time